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Hong Kong's finance regulator has announced additional requirements for retail cryptocurrency traders

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Joyashree Dey Follow


Mar, 06 2023

Mar, 06 2023

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Hong Kong intends to permit regular investors to trade specific digital currencies on authorized exchanges in a significant move to establish itself as a crypto hub. This decision runs counter to both U.S. sanctions against the cryptocurrency industry and China's explicit ban on transactions related to cryptocurrencies.

To "allow all types of investors, including retail investors, to access trading services provided by licensed VA [virtual asset] trading platform operators," the Securities and Futures Commission of Hong Kong (SFC) proposed in a recent consultation paper.

However, the suggestion suggests that a number of requirements are satisfied before cryptocurrency trading for ordinary investors is resumed. These requirements include expertise and risk evaluations, as well as possibly imposing restrictions on the amount of exposure traders are permitted to take.

The SFC also specified the requirements under which cryptocurrencies would be eligible for trading. Trading platforms would be in charge of investigating a token's development team, marketing materials, any legal issues, and network resistance to typical attacks like a 51% attack.

The token pool appears to be somewhat thin after that point, with the Commission suggesting that only "large-cap virtual assets" be permitted to be listed.

Tokens that are included in at least two 'approved indices' issued by at least two independent index providers are what the SFC refers to as this.

Discussions are currently ongoing over these and other facets of the recently proposed cryptosystem in Hong Kong. March 31, 2023, is the date for parties who are interested in taking part. The regime is planned to take effect on June 1st, 2023.

Since the Commission implemented the current legal framework in 2018, the virtual asset environment has altered dramatically, according to the Commission. Only institutional clients and professionals were permitted to use trading platforms under this structure.

This strategy has become a little looser over time. For instance, the SFC permitted retail traders to start trading derivative products and cryptocurrency exchange-traded funds (ETFs last year.

Investors can access the underlying cryptocurrency using the latter kinds of products without having to assume ownership of the asset themselves. In December of last year, HKEX became one of the first stock exchanges in Hong Kong to introduce a Bitcoin and Ethereum ETF product. Both products track futures traded on the Chicago Mercantile Exchange (CME).

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Joyashree Dey

CBW - External Analyst


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